Nonutility Real Estate & Other Legacy Holdings

12 Months Ended

Dec. 31, 2011

Nonutility Real Estate Other Legacy Holdings [Abstract]

Nonutility Real Estate and Other Legacy Holdings

8.	Nonutility Real Estate & Other Legacy Holdings

Within the Nonutility business segment, there are legacy investments involved in energy-related infrastructure and services, real estate, leveraged leases, and other ventures. As of December 31, 2011 and 2010, total remaining legacy investments included in the Other Businesses portfolio total $36.9 million and $52.7 million, respectively. Further separation of that 2011 investment by type of investment follows:

	December 31, 2011
			Value Included In
(In millions)	Carrying Value		Other Nonutility Investments		Investments in Unconsolidated Affiliates
Commercial real estate investments	$	8.0	$	8.0	$	-
Leveraged leases		18.5		18.5		-
Affordable housing projects		3.1		0.1		3.0
Haddington energy partnerships		3.4		-		3.4
Other investments		3.9		3.0		0.9
	$	36.9	$	29.6	$	7.3

Net of deferred taxes related to these leveraged leases, the net investment at December 31, 2011 was $23.1 million.

Commercial Real Estate Charge

During the fourth quarter of 2011, the Company obtained new evidence confirming further weakness in markets where the Company holds legacy real estate investments. The Company holds real estate investments such as an office building, affordable housing projects, and second mortgages. The evaluation of the evidence resulted in a $15.4 million charge in 2011. Of the $15.4 million charge, $8.8 million is reflected in Other-net, $3.6 million is reflected in Equity in earnings/losses of unconsolidated affiliates, and $3.0 million is reflected in Other operating expenses.

Leveraged Leases

The Company is a lessor in leveraged lease agreements under which real estate or equipment is leased to third parties. The total equipment and facilities cost was approximately $45.2 million at December 31, 2011. The cost of the equipment and facilities was partially financed by non-recourse debt provided by lenders who have been granted an assignment of rentals due under the leases and a security interest in the leased property, which they accepted as their sole remedy in the event of default by the lessee. Such debt amounted to approximately $39.8 million at December 31, 2011. Subsequent to year end on January 3, 2012 the Company divested of one leveraged lease with a book value of approximately $5.2 million, and net of deferred taxes a net book value of $2.7 million at December 31, 2011, at a small gain.

Notes Receivable

At December 31, 2011 and 2010, notes receivable totaled $2.1 million and $10.9 million, respectively, and reflect the impairment charges discussed above. These amounts are inclusive of accrued interest and net of reserves totaling $15.7 million and $6.1 million, respectively. As of December 31, 2011, the Company is recognizing interest on the cash basis for substantially the entire note portfolio. Such interest income has been insignificant during the past three years. Second mortgages serve as collateral for notes associated with the commercial real estate investments.

Haddington Energy Partnerships

The Company has an approximate 40 percent ownership interest in Haddington Energy Partners, LP (Haddington I) and Haddington Energy Partners II, LP (Haddington II). As of December 31, 2011, these Haddington ventures have interests in two remaining mid-stream energy related investments. Both Haddington ventures are investment companies accounted for using the equity method of accounting. During 2010, the Company recorded its share of the decline in fair value and also impaired a note receivable associated with Haddington's investment in a liquefied natural gas facility. In total, the charge was approximately $6.5 million, of which, $6.1 million is reflected in Equity in earnings (losses) of unconsolidated affiliates and $0.4 million is reflected in Other income-net, for the twelve months ended December 31, 2010. At December 31, 2011, the Company's remaining $3.4 million investment in the Haddington ventures is related to payments to be received associated with the sale of a compressed air storage facility sold in 2009. The Company has no further commitments to invest in either Haddington I or II.

The following is summarized financial information as to the results of operations of Haddington. For the year ended December 31, 2011, operating results were insignificant. For the year ended December 31, 2010, revenues, operating loss, and net loss were (in millions) zero, $(0.3), and $(18.1), respectively. For the year ended December 31, 2009, revenues, operating loss, and net income were (in millions) zero, $(0.4), and $7.9, respectively.

Variable Interest Entities

Some of these legacy nonutility investments are partnership-like structures involved in activities surrounding multifamily housing and office properties and are variable interest entities. The Company is either a limited partner or a subordinated lender and does not consolidate any of these entities. The Company's exposure to loss is limited to its investment which as of December 31, 2011, and 2010, totaled $3.0 million and $7.0 million, respectively, recorded in Investments in unconsolidated affiliates, and $0.1 million and $9.0 million, respectively, recorded in Other nonutility investments.